Greenwashing will soon not only have consequences for the environment, but also for companies
Green Claims Directive: What companies need to know
Greenwashing as a marketing ploy will face companies in the EU with strict sanctions in the future, because in order to put an end to advertising with untrue environmental claims, the EU Commission presented the so called "Green Claims Directive" in March 2023. This article deals with what companies need to know about this.
Things to know about the Green Claims Directive
Regulations on the accuracy of communicated sustainability claims have not existed in the EU until now. So-called greenwashing, i.e. giving a "green" image, is a popular marketing ploy to make customers believe that they are making an environmentally friendly choice by buying a product. A study by the European Commission (2020) found that 53.3% of environmental claims made in the EU are misleading, and 40% cannot be factually substantiated.
Source: European Commission
Source: European Commission
For this reason, on 23rd of March 2023, the European Commission published a proposal for a directive against advertising that aims to portray a product, service or company as "greener" than it actually is, in order to combat greenwashing. This proposed directive is called the "Green Claims Directive".
The aim of the Green Claims Directive:
- Create transparency to make it easier for customers to shop in an environmentally friendly way.
- Strengthen the competitiveness of market participants who actually make an effort to ensure the environmental compatibility of their products.
- Complement the EU's consumer protection and environmental standards.
Requirements for the description of positive environmental impacts:
All companies that make claims about the environmental performance of their products, services, or the company itself are affected.
The proposed directive advocates that:
- environmental claims may only be made on a data-based basis
- it must be made clear to which part of the product the environmental claim relates
- environmental claims may only be made if the environmental impact goes beyond the minimum required by law
- positive environmental effects may only be advertised if they are not reversed by side effects.
- in the future, eco-labels must comply with EU requirements regarding transparency and scientific assessment methodology
- consumers are provided with further information on the environmental impact of a product via QR code or web link
- all environmental claims must be approved by an independent testing body before being placed on the market
Micro-enterprises with fewer than 10 employees and an annual turnover of no more than €2 million are exempt.
In case of non-compliance with the directive, the following sanctions may be imposed:
- Fines, which vary according to the amount of the resulting economic advantage.
- Siphoning off of the money generated by the untruthfully labelled products
- Exclusion from public tenders and support services for up to 12 months.
Furthermore, companies can expect a boycott by customers whose trust in the company has been abused by greenwashing marketing.
When will the directive come into force?
The proposed directive currently has to go through the EU legislative process. After that, the EU member states have 18 months to incorporate the directive into their national law. After that, another 6 months may pass until the provision finally enters into force.
These are the actions companies can take now
1. Review their own practices:
Already now, companies can carefully review their sustainability practices, claims and communications to identify and avoid any misleading communications.
2. Engage with stakeholders:
Engaging with stakeholders such as customers, employees and investors can help companies better understand sustainability expectations and requirements. Through dialogue and stakeholder engagement, companies can demonstrate their commitment to transparency and sustainability and receive valuable feedback to continuously improve their practices.
3. Educate the entire workforce
Employee education in ESG helps to raise awareness of environmental and social sustainability within the company, thus strengthening motivation for genuine sustainability efforts rather than greenwashing.
Our Glacier Climate Academy offers this education in the field of anti-greenwashing in the Climate Protection Essentials module of the same name. Get started now and master truthful environmental communication together with the entire staff!